Iowa House and Senate Republican leaders today proposed to give a flat $750 to every Iowa household in an effort to return to taxpayers the state’s $800 million budget surplus.

The money would be returned to taxpayers in the form of a tax credit, said Senate Republican Leader Bill Dix, R-Shell Rock, and House Speaker Kraig Paulsen, R-Hiawatha.

That seems pretty straightforward. Better still to give it back as part of simplifying the tax code, but better that than just spending it. Yet just spending it has its advocates:

Senate Democrats who control their chamber said that since it’s early in the session they are open to talking about the Republicans’ proposal, but they have other ideas.

Sen. Joe Bolkcom, D-Iowa City, who chairs the tax-writing Iowa Senate Ways and Means Committee, said Democrats are interested in providing earned income tax credits for lower-income Iowa families and raising the threshold for filing state income taxes. He added that Iowa needs to invest more tax money to clean up dirty rivers and streams, repair crumbling roads and bridges, upgrade the state’s education system and make other improvements.

The earned income credit is a welfare program run through tax returns, with a tremendous rate of fraud. It’s also a poverty trap. The phase-out of benefits with rising income serves as a stiff tax on improving your income. And spending doesn’t become something else just because you call it “investing.”

Taxpayers who took an IRA distribution in December can also roll that into a charity by January 31 and avoid having the distribution included in 2012 income.

These provisions were part of the Fiscal Cliff tax bill, which extended the tax-free status of IRA rollovers to charity along with a bunch of other expired provisions.

Just because your bank is a country bank doesn’t make the banker a bumpkin. Four Nebraskans have been charged with “structuring” — breaking deposits into chunks under $10,000 to avoid federal cash reporting requirements. Federal law requires banks to report cash transactions over $10,000. Folks who don’t want the government to know about their cash sometimes attempt to use multiple smaller transactions to fly under the radar; that’s illegal. Theindependent.com reports:

Randy L. Evans, 59, of Grand Island is charged in a 15-count indictment. In the first 14 counts, it is alleged that between March 29, 2010, and Dec. 27, 2011, Evans structured financial transactions to evade reporting requirements when he made deposits in the amount of $210,381 at Five Points Bank. Count 15 charges him with structuring financial transactions to evade reporting requirements when he made 449 transactions between Jan. 4, 2010, and Feb. 28 at Five Points Bank in the amount of $2,030,322.

Bankers are required to report suspicious transactions, and if you make yourself a regular, they’ll notice — especially in a small-town bank.

Where does this leave liberty’s advocates? First, we have to face the facts. Like it or not, the U.S. Constitution empowers the Congress to levy any tax it wants. Anyone is free to come up with a contrary interpretation, but the constitutionally endowed courts have spoken. Reading one’s libertarian values into the Constitution is futile. For better or worse, the Constitution means what the occupants of the relevant constitutional offices say it means.

In other words, it doesn’t matter if you think the income tax is unconstitutional if the IRS, the federal judge, the Marshals Service and the Bureau of Prisons think otherwise. Fighting the income tax by not filing ruins your finances without hurting the Leviathan one little bit.

Luring and subsidizing your competitors with your tax money. Left-side advocacy group Good Jobs First has released a report slamming “incentive” tax breaks like those used for two fertilizer companies in Iowa last year. The report doesn’t mention Iowa’s programs, but it provides a depressing list of corporate bribery in other states, including subsidies to lure employers from Kansas City, Kansas across the river to Kansas City, Missouri, and vice-versa. Their press release gets it right:

Interstate job piracy is not a fruitful strategy for economic growth, [report author Greg] LeRoy noted: “The costs are high and the benefits are low, since a tiny number of companies get huge subsidies for moving what amounts to an insignificant number of jobs.” LeRoy added: “The flip side is job blackmail: the availability of relocation subsidies makes it possible for companies that have no intention of moving to extract payoffs from their home states to stay put.”

For all the abuse, the organization’s recommendations are modest. I would eliminate all such subsidies and replace them with a simple low-rate tax system for everyone. The Tax Update Quick and Dirty Iowa Tax Reformwould be a great start here.